Tax Project

RECOMMENDATION FOR SAVING FOR CHILDREN’S EDUCATION
Facts: Facts: Taxpayers are married and have three children, ages 9, 7 & 3. Their joint income is currently $200,000 per year.
Assumptions: Taxpayers will not have more children and they will not divorce. Their income is $200,000 per year and stays constant. They currently live in California and their children will attend college, specially the UC System, at age 18. So there are 9, 11 and 15 years until the children will need the funds. Due to the parents’ high income, the children will not be eligible for any financial aid. Based on additional assumptions that the tuition inflation rate is 8.3% and the current tuition amount for the UC system is $13,200, Table I shows the tuition amounts needed for each child.
Table I: Tuition Amounts Need for Each Child for Each Year of College | 1st | 2nd | 3rd | 4th | Total | 3year old | $ 43,651.7 | $ 47,274.7 | $ 51,198.6 | $ 55,448.0 | $ 197,573 | 7 year old | $ 31,731.2 | $ 34,364.9 | $ 37,217.2 | $ 40,306.2 | $ 143,620 | 9 year old | $ 27,053.9 | $ 29,299.4 | $ 31,731.2 | $ 34,364.9 | $ 122,449.5 | Total | | | | | $ 463,642.5 |

Issue: Based on Table I, it would be difficult to save for the children’s education based on the taxpayer’ income. We do not attempt to maximize the value of our investments due to market risk for different investments. Therefore, the overall goal is to maximize tax savings. Our five two choices are: Custodian Accounts under the Uniform Gift to Minors Act and Section 529 plans.
Conclusion: Section 529 plans is the best choice because it provide the best tax advantages.
Reasoning: Section 529 Plans provide unsurpassed tax advantages. It is the best option because it is the only one, in which income from investments is not subject to income tax if used for…...

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From:
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* This assignment has not been submitted previously for assessment.
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* The electronic version of this assignment has been submitted in compliance with the project requirements.
I consent to the Institute notifying my employer and/or any tertiary institution at which I am enrolled if this assignment constitutes an actual or reasonably suspected breach of any of the Institute’s Bye-Laws and Exam Regulations.
I acknowledge that the Institute will retain the original of this assignment.
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Imposed on non-residents on services rendered by them.
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Net payment
Non-resident
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Payer
Tax authorities
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(a)
(b)
(c)
(d)
(e)
(f)
Special classes of income (S 4A)
Interest (S 15)
Royalty (S 15)
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Public entertainer (S 109A)’
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Royalty
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NR
R
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Sec. 4A Income.
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Royalty.
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Public Entertainer’s.
Remuneration.
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Payer
NonResident
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Authorities
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Research Project
Dr. DYE
Emily M. Evans
8/3/2012
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Background
A husband and wife, Milo and Sharyln Shellito operated a farm in Kansas for over twenty years. They both worked full time on the farm for that time. The land was mainly owned by third parties, but they leased the land to Milo. Milo and Sharyln decided to purchase a business plan in 2001. It was called AgriPlan/BizPlan. In it was included a preprinted medical reimbursement plan. Milo and Sharyln relied on their accountant on the implementation of the plan. Their accountant recommended that Sharyln become an employee of the husband and be given a monthly salary of one hundred and reimbursements for both medical expenses and health insurance premiums. A log was kept of her hours to show she worked full time, but her duties and daily activities were not recorded. ......